September 25, 2018

Global Markets Research Fixed Income

Fixed Income Daily Market Snapshot

UST US Treasuries Tenure Closing (%) Chg (bps)  US Treasuries were weaker with pullbacks seen across the 2-yr UST 2.82 2 curve as the FOMC meeting draws near. Overall benchmark 5-yr UST 2.97 2 yields were 2-3bps higher from prior day’s close with the 2Y 10-yr UST 3.09 3 ending 2bps higher at 2.82% levels whilst the much-watched 30-yr UST 3.23 3 10Y rose 3bps to 3.09%. Treasury’s $37b of 2Y auction notched a lower BTC ratio of 2.44x since December 2016 (compare with MGS GII* 2.82x average for past 6 auctions); averaging 2.829%. Worries over a global trade spat may be on the back-burner as attention Tenure Closing (%) Chg (bps) Closing (%) Chg (bps) shifts to the upcoming FOMC meeting on 27th September as the 3-yr 3.61 0 3.48 0 probability of a rate hike stands at 98%. The impact on UST’s 5-yr 3.75 0 3.88 0 will be watched closely as strategists have mixed views on the 7-yr 3.98 3 4.03 -1 direction of yields going forward. Nevertheless pension funds 10-yr 4.09 -1 4.16 0 and lifers demand for long-term debt are expected to keep the 15-yr 4.53 3 4.62 0 long-end anchored. 20-yr 4.69 0 4.76 0 30-yr 4.90 0 4.97 0 * Market indicative levels MGS/GII  Trading volume in Govvies plunged to RM1.65b yesterday with MYR IRS Levels some interest seen across the shorter off-the-runs. Both IRS Closing (%) Chg (bps) offshore and onshore players were mostly sidelined ahead of 1-yr 3.71 0 the FOMC rate decision tomorrow night (local time). Overall 3-yr 3.77 0 benchmark yields were generally 0-3bps higher save for the 7Y 5-yr 3.86 0 GII bond. The 7Y MGS 3/25 rose almost 3bps at 3.98% levels 7-yr 3.99 0 on tepid volume whilst the 10Y MGS 6/28 edged 1bps higher at 10-yr 4.18 0 4.09%. GII trades fell to 12% of total trades. The ongoing efforts Source : Bloomberg taken by the present government to address budget deficits and improve overall economy is seen positive in the medium-to-long term prospects for the country despite some setback due to intermittent EM outflows. Upcoming Government Bond Tender

Nil Corp Bonds/Sukuk Sep  Corporate bonds/Sukuk saw solid investor interest as volume maintained at RM741m with focus mainly on the AAA-segment

followed by both GG and AA-part of the curve encompassing 36 different bonds compared to prior trading day’s 30. Overall yields ended lower with many 10-20Y papers exchanging hands. The Govt-guaranteed DANA 23-24’s and ended 1-5bps

lower between 4.04-18% levels whist both the long DANA 5/37 and PRASA 3/38 closed within 1bps between 4.85-88% compared to previous-done levels. The AAA-rated shorter- tenured DANGA and RANTAU 20’s saw RM115m nominal amount traded between 0-1bps lower at 4.04% levels. In the AA-space; energy bonds eg Southern Power 24-32’s, SPR Energy 25-34’s, SEB 8/35 and MALAKOFF 12/18 resumed to fall on the radar of investors on lower yields.

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FIXED INCOME September 25, 2018

Daily Trades : Government Bonds Securities Closing Vol Previous Previous Chg YTM (RM mil) YTM Trade Date (bp) (dd/mm/yyyy) MGS 09/18 3.337 260 3.518 21/09/2018 -18 MGS 03/19 3.150 41 3.201 20/09/2018 -5 MGS 11/19 3.421 160 3.395 21/09/2018 3 MGS 03/20 3.478 102 3.471 21/09/2018 1 MGS 07/20 3.503 1 3.445 18/09/2018 6 MGS 10/20 3.528 3 3.496 19/09/2018 3 MGS 07/21 3.561 132 3.587 21/09/2018 -3 MGS 09/21 3.638 11 3.627 21/09/2018 1 MGS 11/21 3.609 173 3.605 21/09/2018 0 MGS 03/22 3.602 15 3.643 20/09/2018 -4 MGS 09/22 3.768 23 3.754 21/09/2018 1 MGS 04/23 3.742 67 3.747 21/09/2018 0 MGS 08/23 3.849 10 3.833 21/09/2018 2 MGS 07/24 3.962 79 3.956 21/09/2018 1 MGS 09/24 3.965 1 3.974 21/09/2018 -1 MGS 03/25 3.977 24 3.953 21/09/2018 2 MGS 09/25 4.068 3 4.045 21/09/2018 2 MGS 11/26 4.176 9 4.169 21/09/2018 1 MGS 11/27 4.151 58 4.152 21/09/2018 0 MGS 06/28 4.091 20 4.078 21/09/2018 1 MGS 04/30 4.458 1 4.478 21/09/2018 -2 MGS 04/33 4.554 70 4.544 21/09/2018 1 MGS 11/33 4.531 130 4.499 21/09/2018 3 MGS 05/35 4.716 1 4.713 21/09/2018 0 MGS 04/37 4.705 2 4.728 20/09/2018 -2 MGS 07/48 4.905 60 4.901 21/09/2018 0 GII 04/22 3.711 92 3.765 21/09/2018 -5 GII 08/25 4.027 40 4.037 21/09/2018 -1 GII 10/28 4.161 60 4.162 21/09/2018 0 1648

Daily Trades: Corp Bonds / Sukuk Securities Maturity Rating Closing Vol Previous Previous Chg Spread (dd/mm/y YTM (RM mil) YTM Trade Date (bp) Against yyy) (dd/mm/yyyy) MGS* DanaInfra Nasional Berhad 05/23 GG 4.038 80 4.051 19/09/2018 -1 28 DanaInfra Nasional Berhad 05/24 GG 4.119 45 4.147 19/09/2018 -3 21 Prasarana Malaysia Berhad 09/24 GG 4.188 20 4.341 05/12/2017 -15 28 DanaInfra Nasional Berhad 11/24 GG 4.180 10 4.231 19/07/2018 -5 27 DanaInfra Nasional Berhad 05/37 GG 4.849 15 4.854 06/09/2018 0 15 Prasarana Malaysia Berhad 03/38 GG 4.881 10 4.868 05/09/2018 1 18 Cagamas Berhad 10/19 AAA 3.870 10 4.000 03/04/2018 -13 51 Danga Capital Berhad 04/20 AAA 4.038 20 4.045 13/09/2018 -1 55 Rantau Abang Capital Berhad 12/20 AAA 4.041 95 4.044 14/09/2018 0 56 Cagamas Berhad 04/21 AAA 4.020 10 4.220 24/04/2018 -20 41 GENM Capital Berhad 07/23 AAA 4.829 40 4.797 18/09/2018 3 107 Telekom Malaysia Berhad 08/23 AAA 4.284 20 4.288 04/09/2018 0 53 Danga Capital Berhad 09/27 AAA 4.513 80 4.650 19/07/2018 -14 42 Telekom Malaysia Berhad 05/28 AAA 4.559 30 4.568 30/08/2018 -1 47 Danga Capital Berhad 01/30 AAA 4.636 10 4.631 06/09/2018 0 54 Bank Pembangunan Malaysia Berhad 03/32 AAA 4.858 10 4.924 09/08/2018 -7 36 Berhad 08/32 AAA 4.705 5 4.711 04/09/2018 -1 20 Projek Lebuhraya Usahasama Berhad 01/33 AAA 4.828 10 4.818 27/08/2018 1 33 Tenaga Nasional Berhad 08/33 AAA 4.735 20 4.750 21/09/2018 -1 23 Sabah Development Bank Berhad 07/20 AA1 4.798 20 4.731 29/08/2018 7 131 Public Islamic Bank Berhad 06/24 AA1 4.145 10 4.155 10/08/2018 -1 24 Sarawak Energy Berhad 08/35 AA1 5.040 30 5.039 13/09/2018 0 54 CIMB Islamic Bank Berhad 09/24 AA+ 4.396 5 5.051 21/08/2018 -66 49 Fortune Premiere Sdn Berhad 03/23 AA 4.778 10 4.789 06/08/2018 -1 108 Malakoff Power Berhad 12/18 AA- 4.077 10 4.157 24/08/2018 -8 71 Bumitama Agri Ltd 03/19 AA3 4.327 10 4.322 28/08/2018 0 96 SPR Energy (M) Sdn Berhad 07/25 AA3 4.890 10 4.968 25/07/2018 -8 93 SPR Energy (M) Sdn Berhad 07/33 AA3 5.338 15 5.339 19/09/2018 0 84 SPR Energy (M) Sdn Berhad 07/34 AA3 5.421 15 5.530 31/07/2018 -11 92 TSH Sukuk Ijarah Sdn Berhad 03/22 AA- 4.719 10 4.881 20/03/2018 -16 102 Southern Power Generation Sdn Berhad 10/24 AA- 4.608 10 4.619 19/09/2018 -1 70 Southern Power Generation Sdn Berhad 04/27 AA- 4.742 10 4.879 16/07/2018 -14 65 Southern Power Generation Sdn Berhad 10/32 AA- 4.919 10 5.139 16/07/2018 -22 42 Affin Bank Berhad 02/27 A1 4.900 10 4.855 07/08/2018 4 83 AMMB Holdings Berhad 03/27 A1 4.826 6 4.931 03/07/2018 -11 76 Affin Bank Berhad 09/27 A1 4.960 10 4.700 30/08/2018 26 86 741

*spread against nearest indicative tenured MGS (Source : BPAM) 2

FIXED INCOME September 25, 2018

Market/Corporate News: What’s Brewing

A supertanker carrying the first crude oil cargo to a refinery being jointly built by Malaysia's and oil giant Saudi Aramco has arrived at Pengerang, as the two companies enter the commissioning and testing phase at the plant. Construction of the 300,000 barrels-per-day (bpd) refinery at the Pengerang Integrated complex is nearing completion, Petroliam Nasional Berhad (Petronas)[PETR.UL] said in a statement issued late on Monday. The cargo of 2 million barrels of crude oil supplied by Petronas and Aramco will be used for the commissioning and testing activities which are scheduled to start in October, Petronas added. "The arrival of the cargo signifies our readiness to move forward to start-up and commercial operations," said Colin Wong Hee Huing, chief executive of PRefChem which is an alliance of both companies. He added that the refinery was on track to start up in the first quarter of 2019. Once completed, the refinery will produce a range of refined oil products including gasoline and diesel which meet Euro 5 fuel specifications, Petronas said. Additionally, the refinery will provide feedstock for the integrated petrochemicals complex. Speaking earlier at the Asia Pacific Petroleum Conference, Ibrahim Al-Buainain, Aramco Trading Company's president and chief executive, said that the first crude oil cargo for the Malaysian project was discharging out of a very large crude carrier (VLCC). The supertanker Navarin carrying 1 million barrels each of Saudi Arab Medium crude and Iraqi Basra Light crude arrived in Malaysia on Sept. 21 and is now moored off the Pengerang oil terminal, according to trade sources and shipping data on Thomson Reuters Eikon. The $27 billion refining and petrochemical project located between the Malacca Strait and the South China Sea, is a conduit for Middle East oil and gas bound for China, Japan and South Korea. "This is part of our downstream strategy," Buainain said. "Asia is a key market for us and most of the demand is from this region." (Source: The StarOnline/Reuters)

Sapura Energy Bhd’s wholly-owned subsidiaries have secured four contracts, including contract extension, with a combined value of about RM815 million. In a filing with Bursa Malaysia today, Sapura Energy said the contracts are expected to contribute positively towards the earnings of the group for the financial year ending Jan 31, 2019. For its engineering and construction division in Malaysia, Sapura Fabrication Sdn Bhd has received a contract to undertake the provision of Pan Malaysia maintenance, construction and modification contract for ExxonMobil Exploration and Production Malaysia Inc (EMEPMI), said the announcement. It added the contract scope of work comprises procurement, onshore pre-fabrication works, offshore maintenance, construction and modification works related to topside maintenance, workover preparation and facilities improvement projects for EMEPMI offshore facilities in Peninsular Malaysia water. The contract is a call-out contract where works will be carried out according to work orders issued by EMEPMI based on contract unit rates and prices. The duration of the primary contract will be for a period of five years, expiring in July 2023, with an option for a one-year extension. Simultaneously, in Australia, Normand Sapura Pty Ltd was awarded a contract from Quadrant Energy Australia Ltd to undertake an offshore installation works for its East Spar intelligent pigging and removal project under its engineering and construction division. Sapura Energy said the contract involves the intelligent pigging of the East Spar subsea pipeline from East Spar pipeline end manifold (PLEM) up to the onshore processing facilities in Varanus Island, off the North West coast of Western Australia in Commonwealth waters. “It also involves the recovery of all subsea infrastructures from three subsea wells (ES1, ES3 & ES6) consisting of subsea heat exchangers, tie-in spools, flexible flowlines and associated control umbilical for dismantling and disposal in accordance with regulations,” it said. The contract will be executed by Sapura constructor, a DP2 subsea construction & saturation diving vessel. In Nigeria, Sapura Energy said Sapura Offshore Sdn Bhd was awarded the subcontract by Saidel Limited for the provision of construction engineering and offshore construction

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FIXED INCOME September 25, 2018

of a 16” Southern SWAMP sales gas evacuation pipeline project in the Delta Region of Nigeria operated by Shell Petroleum Development Company of Nigeria. It said the scope of work comprises 16” x 18.4 kilometres pipeline from onshore target Box to EA riser platform - A including 1.62 kilometres beach pull, three sections tie-in spool at EA riser platform - A and two concrete mattress installation at crossing location offshore Nigeria. Both the Australia and Nigeria works are expected to be completed by the fourth quarter of 2019 (4QFY19), Sapura Energy added. Meanwhile, for its drilling segment, Sapura Energy said Sapura Drilling Sdn Bhd has received a one-year extension on its contract from Brunei Shell Petroleum Co Sdn Bhd for the provision of a semi-submersible tender assisted drilling rig, “Sapura Pelaut”, and drilling services. The scope of the contract extension comprises the provision of a semi-submersible tender assisted drilling rig for a firm commencing from 1QFY20 with a further one year option in Bruneian waters. (Source: The Edge Markets/Bernama )

SRating Action Issuer PDS Description Rating/Outlook Action Batu Kawan Berhad RM500 million Islamic Medium-Term Notes AA1/Stable Reaffirmed Programme (2013/2023).

Source: RAM, MARC

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FIXED INCOME September 25, 2018

Hong Leong Bank Berhad Fixed Income & Economic Research, Global Markets Level 8, Hong Leong Tower 6, Jalan Damanlela Bukit Damansara 50490 Kuala Lumpur Tel: 603-2081 1221 Fax: 603-2081 8936 Email: [email protected]

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